Australia-listed ALS Limited reported that it has entered into an agreement to acquire United Kingdom-based Reservoir Group for $533 million, or 9.6 times Reservoir's fiscal year (FY) 2013 earnings before interest, taxes, depreciation and amortization (EBITDA ). The transaction follows extensive due diligence undertaken by ALS on Reservoir as a part of an exclusive sale process.
Reservoir is a global provider of specialist oil and gas services and equipment that assists with the evaluation, development and optimization of oil and gas discoveries. Reservoir operates five segments: Coring (49 percent of Reservoir's FY 2013 revenue); Laboratory Analysis (4 percent of Reservoir's FY 2013 revenue); Surface Logging (28 percent of Reservoir's FY 2013 revenue); Downhole Tools (4 percent of Reservoir's FY 2013 revenue) and Specialist Well Services (15 percent of Reservoir's FY 2013 revenue). Services and equipment provided by Reservoir assist with understanding, planning, accessing and optimizing reservoir potential. Reservoir has a global presence with major hub operations in Aberdeen, Dubai, Houston and Edmonton, operational infrastructure in approximately 40 sites covering key oil and gas provinces and over 900 employees. The business enjoys long-term relationships with a strong customer base of national and international oil companies, independent oil companies and global service providers to the oil and gas industry.
The existing senior management team of Reservoir has committed to continue in the business and is rolling over approximately 50 percent of their equity in Reservoir into ALS shares, which will result in Reservoir senior management having a 1.5 percent pro forma shareholding in ALS. Multi-year conditional escrow arrangements have been put in place for the two largest management shareholders and retention bonuses have been agreed with all key Reservoir senior management.
Separately, ALS has also agreed to acquire Earth Data for approximately $16.6 million (AUD 18 million). Earth Data is an Australian-based provider of gas sampling and analysis services to Australia's oil and gas industries, and safety monitoring sampling and analysis for fugitive emissions to Australian coal mines. Earth Data operates laboratories in Brisbane and the Hunter Valley, and employs approximately 60 staff.
Completion of the acquisitions of Reservoir and Earth Data are subject to limited conditions precedent and are both expected to complete by early August 2013. The acquisition of Reservoir is conditional on ALS securing United States antitrust approval and no material adverse change in Reservoir.
In the year ended March 31, Reservoir generated:
The acquisition of Reservoir is expected to be earnings per share (EPS) accretive to ALS in FY2014 (pre-synergies).
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